Risk.net on FICC Repo Trades
Risk.net writes "Goldman and Federated first to clear MMF repo trades." Subtitled, "Money funds cleared over $10 billion of US Treasury repo trades at FICC in June and July," the article says, "Goldman Sachs Asset Management and Federated Investors have become the first money market fund managers to clear their US Treasury repo trades at the Fixed Income Clearing Corporation, a subsidiary of the Depository Trust & Clearing Corporation. The transactions were cleared via FICC's revamped sponsored repo service, which received regulatory approval on May 2, with Bank of New York Mellon acting as the sponsoring member. GSAM and Federated cleared a total of 14 trades in June and July worth a combined $10.2 billion, according to data from the Office of Financial Research, the research arm of the US Department of the Treasury.... Investor reports released by GSAM and Federated reveal cleared repo trades can generate higher returns for MMFs. GSAM's Financial Square Government Fund earned 111 basis points on average on its cleared trades in June compared with 104bp on average for non-cleared trades with bank counterparties. The fund earned an even higher return of 112bp on a direct repo trade with insurance firm Prudential." The piece adds, "FICC, which already clears the bulk of repo trades between dealers in the US, has spent years developing a clearing service for MMFs and other buy-side participants. The clearing house launched a sponsored access programme for registered investment companies in 2005, but the service failed to gain traction with asset managers. On May 2, the US Securities and Exchange Commission approved a proposal by DTCC to revise its membership criteria for its Government Securities Division -- which includes FICC -- to allow other qualified institutional investors beyond registered investment companies to participate in the sponsored access service. BNY Mellon was confirmed by DTCC as a sponsoring member on June 8 and Federated and GSAM became sponsored members on June 8 and June 20 respectively. State Street has also been approved as a sponsoring member.... MMFs managed by Western Asset Management and Invesco also joined FICC's sponsored repo clearing service on July 28 and August 15 respectively, according to DTCC notices.... FICC was also granted SEC approval on May 2 for its Centrally Cleared Institutional Tri-Party (CCIT) repo clearing service for the buy side, excluding registered investment companies. Citadel and Morgan Stanley executed the first CCIT trade on June 29."
